Aereo’s Dissent

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I had been waiting for the Supreme Court ruling on Aereo all week. When it came down yesterday, it felt a little bit like Groundhog Day. If the Supreme Court sided with Aereo, winter would be over; if they didn’t, six more weeks of cold. Either way, I think Aereo will eventually have its own spring… but now it will take a while.

So here’s the bad news: the Supreme Court yesterday ruled that Aereo is illegal. They said that Aereo technology, despite actually operating within the boundaries set forth by the Copyright Act, simply looks and acts too much like a cable company as an end product.

And so… Your cable bill will still be through the roof, and you’ll still have to buy the Tennis and Golf channels if you want to watch football on ESPN. You’ll still have to battle with customer service agents over bogus charges and steadily rising monthly rates, and still, after all these years, if you want to watch content on some device other than your TV, you’ll have to buy and download that content even though you already paid for it with cable.

So before I go any further, I want to state for the record that, like Justices Scalia, Thomas and Alito, I dissent.

A Little History

The TV industry is based on an oligopoly that started ages ago. The reason Time Warner and Comcast can cry “no monopoly” as they inch towards a merger all stems from their history, in which each company dug trenches and invested time and resources to build out the infrastructure that we enjoy today. They didn’t overlap because it was tough enough just to build out a regional empire. Ultimately, these cable companies turned into lords of each of their realms, forming regional monopolies that consolidated over and over again to comprise a small group. The same group of big guns we get bills from today.

Your cable bill will still be through the roof, and you’ll still have to buy the Tennis and Golf channels if you want to watch football on ESPN.

Of course, there are a few little guys who still operate regionally, but they’re minor players in the game.

Because of these monopolies, cable companies could charge broadcasters and networks exorbitant fees for the content without any undercutting from competition. When the networks saw the inequity within the relationship, the government helped out.

Essentially, they said that broadcasters could have a bunch of public resources, including wireless spectrum, that would be available to consumers outside of the reach of the cable companies. In return for the spectrum and the return to balance with the cable companies, the broadcast networks would air their content for free to consumers. With millions of eyes on their ads, it was a pretty good deal.

Up until the last decade, broadcast networks didn’t get any retransmission fees from anyone. But they weren’t just sitting around twiddling their thumbs. They bought up other media companies, built out other channels.

As American households shifted away from antennas, media companies were building out empires of various programming. Cooking channels. Niche sports channels. Channels aired in other languages. Channels for dudes. Channels for chicks. Channels for people who love stand up comedy, and channels for people who love watching toddlers compete in pageants.

Suddenly, the American consumer had a lot to choose from, but only a few places to get it. The cable companies had their regional monopolies, and as a countermeasure, the media companies built up an oligopoly, too.

Bundle All The Things

There is a very small group of media companies that are responsible for the vast majority of the television available to you. The Walt Disney Company, Comcast, CBS Corporation, and News Corp have pretty much all of it: E! to Oxygen to Bravo!, ESPN to FX to Esquire Network, and everything in between.

Shockingly, ESPN is far more popular than the Disney XD channel, and so the Walt Disney Company can sell them together to the cable companies, who really don’t have much of a say at all. But it goes beyond that. Media companies are not only bundling all their extra cable programming into one over-priced wholesale package to the cable companies, but they’re now charging retransmission fees for their broadcast content.

Yes, cable companies pay exorbitant rates to send you content that is actually available to you for free, because the networks have the leverage to withhold CBS if the deal doesn’t also include a dozen of their other popular channels, as well as a handful of incredibly unpopular channels.

Sure, the production costs of television continues to rise. Dramas and sitcoms have become increasingly labor-intensive, and the inflation of sports rights is even worse. But don’t let that fool you. The folks at these media companies are making bank. They have all of us, not just cable companies, in their pockets.

What’s It To You?

Let’s zoom back in to you, the American consumer.

Five years ago, your cable bill was probably around $60. Today, it’s probably closer to $120. Some of us are perfectly fine with this. The TV content continues to get better, and more varied, and is worth the rising cost. To some.

As consumers, the only voice we have comes from the mouth of our wallet.

For most of us, however, we watch a few things on TV and that’s all. We have our favorite shows, or maybe we love sports. We don’t need 500 channels. In fact, we only ever watch about three or four different channels at all. And yet, we pay for 500.

Pardon my French, but that’s fucked up.

And it gets more fucked by the second, because the cable companies are consolidating yet again. As consumers, the only voice we have comes from the mouth of our wallet. We don’t pay The Walt Disney Channel or News Corp or NBC Universal. We pay Time Warner Cable and Comcast. The only imprint we can make is the bill we pay each month, and when the few competitors in the space join forces, our choice in the matter disappears.

The one or two cable companies will pay the fees demanded of them, and they’ll charge us even more because we have no other option, and we’ll be even more fucked than we are today.

Aereo Is Not A Duck

Just like cable, Aereo lets you tune to your favorite show, watch it live, and record it to a DVR service. The process by which it achieves this is very different from the way that cable companies do it, however.

While cable companies are forced to pay for free content and then charge you for that free content, Aereo developed a way to let users rent a remote antenna, as well as subscribe to a cloud locker service to achieve the same effect. Both the antenna, and the DVR service are very legal.

But when combined, Aereo takes on the appearance of a cable company.

It looks like a duck and quacks like a duck, but it’s not a duck. Unfortunately, the Supreme Court was very focused on Aereo’s aviary appearance.

Within the opinion, the court even admits that Aereo’s method and technology for delivering content is very different from the cable companies. It also states that this difference (based around user involvement in the process of transmission) could be the saving grace for other technology providers, but not for Aereo.

This Court recognizes one particular difference between Aereo’s system and the cable systems at issue […]. The systems in those cases transmitted constantly, whereas Aereo’s system remains inert until a subscriber indicates that she wants to watch a program. In other cases involving different kinds of service or technology providers, a user’s involvement in the operation of the provider’s equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act. But given Aereo’s overwhelming likeness to the cable companies targeted by the 1976 amendments, this sole technological difference between Aereo and traditional cable companies does not make a critical difference here

It just looks too damn much like a duck.

Dissent vs. Descent

Of the nine Justices making the decision, three dissented. Justices Scalia, Thomas and Alito sided with Aereo.

And to be perfectly honest, the dissent seems to make far more sense than the actual opinion:

The Networks sued Aereo for several forms of copyright infringement, but we are here concerned with a single claim: that Aereo violates the Networks’ “exclusive righ[t]” to “perform” their programs “publicly.” 17 U. S. C. §106(4). That claim fails at the very outset because Aereo does not “perform” at all. The Court manages to reach the opposite conclusion only by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard (“looks-like-cable-TV”) that will sow confusion for years to come

SCOTUS promised that this ruling will not affect similar technology providers, like cloud storage companies, but how can they keep that promise? This is, for all intents and purposes, a new precedent.

If 1 million people buy Forgetting Sarah Marshall on iTunes, half of them upload it to Google Drive, and a thousand of them choose to stream it down to themselves at the same time, then isn’t that considered a public performance, too? Isn’t Google Drive acting similarly to a cable company?

The implications here are frankly terrifying, but that’s not even the biggest loss.

The biggest loss is Aereo itself.

I have been covering Aereo since it was but a glimmer in Barry Diller‘s eye. I had high hopes for the company, based almost entirely around how desperately the TV industry needs disruption. As much as I love Aereo, I’ve never believed it would replace the current head honchos of the industry, but it was the Friendster before the Facebook. It was the stepping stone that is necessary to cross this turbulent river into a land where you can choose the content you want to watch and pay only for that content.

It’s disheartening that our greatest chance at a brave new world was obstructed by the government, but the fight is not over. If it’s not Aereo, another someone or something will come in and chip away as well, just like Netflix and Hulu and others.

Slowly but surely, the industry is fragmenting into media streaming players and binge-viewed content and streaming content companies. It’s no longer if, but when.